Correlation Between ROYAL CANADIAN and Canso Credit

Can any of the company-specific risk be diversified away by investing in both ROYAL CANADIAN and Canso Credit at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining ROYAL CANADIAN and Canso Credit into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ROYAL CANADIAN MINT and Canso Credit Trust, you can compare the effects of market volatilities on ROYAL CANADIAN and Canso Credit and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in ROYAL CANADIAN with a short position of Canso Credit. Check out your portfolio center. Please also check ongoing floating volatility patterns of ROYAL CANADIAN and Canso Credit.

Diversification Opportunities for ROYAL CANADIAN and Canso Credit

0.7

Correlation Coefficient

ROYAL CANADIAN  Canso Credit

Poor diversification

The 3 months correlation between ROYAL and Canso is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding ROYAL CANADIAN MINT and Canso Credit Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canso Credit Trust and ROYAL CANADIAN is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on ROYAL CANADIAN MINT are associated (or correlated) with Canso Credit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canso Credit Trust has no effect on the direction of ROYAL CANADIAN i.e., ROYAL CANADIAN and Canso Credit go up and down completely randomly.

Pair Corralation between ROYAL CANADIAN and Canso Credit

Assuming the 90 days trading horizon ROYAL CANADIAN MINT is expected to generate 2.12 times more return on investment than Canso Credit. However, ROYAL CANADIAN is 2.12 times more volatile than Canso Credit Trust. It trades about 0.23 of its potential returns per unit of risk. Canso Credit Trust is currently generating about 0.05 per unit of risk. If you would invest  2,732  in ROYAL CANADIAN MINT on December 22, 2024 and sell it today you would earn a total of  523.00  from holding ROYAL CANADIAN MINT or generate 19.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

ROYAL CANADIAN MINT  vs.  Canso Credit Trust

ROYAL CANADIAN MINT

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ROYAL CANADIAN MINT are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, ROYAL CANADIAN unveiled solid returns over the last few months and may actually be approaching a breakup point.

Canso Credit Trust

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Canso Credit Trust are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Canso Credit is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ROYAL CANADIAN and Canso Credit

The main advantage of trading using opposite ROYAL CANADIAN and Canso Credit positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ROYAL CANADIAN position performs unexpectedly, Canso Credit can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Canso Credit will offset losses from the drop in Canso Credit's long position.

The idea behind ROYAL CANADIAN MINT and Canso Credit Trust pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.